THE 2004 BUDGET SPEECH

BY

YAB DATO SERI DR. MAHATHIR BIN MOHAMAD

PRIME MINISTER AND MINISTER OF FINANCE I MALAYSIA

INTRODUCING THE SUPPLY BILL (2004)

IN THE DEWAN RAKYAT

12 SEPTEMBER 2003

“BUILDING ON SUCCESS, INVESTING FOR THE FUTURE”

Mr. Speaker Sir,

1.

I beg to move the Bill intituled “An Act to apply a sum from the

Consolidated Fund for the service of the year 2004 and to appropriate

that sum for the service of that year’’ be read a second time.

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INTRODUCTION

In the name of Allah, the most gracious and most merciful.

2. Praise be to Allah, for enabling the Government to once

again table the 2004 National Budget in this Honourable House. The

Mid-Term Review of the Eighth Malaysia Plan (8thMP), which is currently

being undertaken will be tabled in this House on 30 October 2003. 3. In formulating the 2004 Budget, we have therefore, taken into

account the performance of the first half of the 8thMP period with the view

to ensuring the full implementation of development policies and

strategies.

HALF A CENTURY OF RAPID PROGRESS

Mr. Speaker Sir,

4. The nation has just celebrated its 46th year of independence.

We are grateful to the Almighty as Malaysians from all walks of life were

able to celebrate the occasion in an environment of peace, prosperity

and jubilance. We value our independence. We are free from

colonisation. We are also free from domination by super powers. We

are also able to regain our honour and dignity. We are able to manage

our country. Our country has achieved significant progress as well as

gained recognition and respect of the world.

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5. When we gained independence, our economy was

completely dependent on rubber and tin. However, our efforts to

transform the economy since the 70s have turned Malaysia into a

modern economy, with the industrial and services sectors contributing

almost 90% to the Gross Domestic Product (GDP). The nation has

embarked on the development of heavy industries and is now producing

our very own national cars, which have penetrated nearly 80% of the

domestic market. Today, we are the 17th largest trading nation in the

world and a major exporter of electronic products. Exports of

manufactured goods exceed 85% of the nation’s exports.

6. To meet our industrialisation needs, we have also put in

place a network of modern and efficient infrastructure. The nation is now

connected by the North-South and East-West Highways. We have also

built modern urban transportation in Kuala Lumpur and its surroundings

with the construction of the Light Rail Transit (LRT), monorail and electric

rail commuter. We have also constructed ports and world-class

international airports. Malaysian ports presently have the capacity to

handle 11 million TEU containers and about 450 million tonnes of cargo.

Port Klang presently ranks 11th while the Port of Tanjung Pelepas 22nd in

the World Container Port League. The Kuala Lumpur International

Airport (KLIA), which has the capacity to handle 25 million passengers

and 5 million tonnes of cargo, is the most modern airport in the region.

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7. We have also made headways in the area of ICT. The

Multimedia Super Corridor (MSC) has been developed with state-of-the-

art multimedia infrastructure. Indeed, MSC marks yet another significant

step towards propelling the nation into an ICT-based economy. To date,

MSC has attracted more than 900 local and international ICT companies,

far exceeding the target of 500 for 2003. Clearly, earlier sceptics have

now been proven wrong.

8. In the past, the construction of such large infrastructure was

carried out by foreigners. Now Malaysians have the expertise and

technological capability to undertake these projects ourselves. The

nation has nearly 44,000 engineers in civil, mechanical and electrical

engineering as well as 3,000 architects and 2,000 quantity surveyors.

With our experience in the construction of the Second Link, the Kuala

Lumpur Telecommunications Tower and Petronas Twin Towers,

Malaysians have successfully built the Putrajaya Administrative Centre, a

well-planned and beautiful city, a model for other countries. 9. We have been successful in the construction of the Sepang

F1 track, which is acclaimed as one of the best in the Grand Prix circuits.

Our young engineers participated in the venture to further enhance high-

performance cars used by Sauber Petronas to compete in the FI race.

Such experience has contributed towards further developing the

engineering capability of Petronas to produce petroleum products for the

automobile industry.

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10. Many Malaysian companies have ventured abroad. The

largest is Petronas, which is now one of the major international

petroleum companies, operating in 34 countries across the world.

Petronas is involved in exploration, production, refinery and marketing of

oil and gas and is listed in the Fortune Global 500.

11. We have also become a centre of excellence in education.

Today, we have 18 public institutions of higher learning, including an

International Islamic University, as well as hundreds of private colleges

to meet the educational needs of Malaysians. A total of 70 colleges has

also been established to produce technical manpower. We have also

been recognised as a centre of excellence in education by foreign

students. Currently, there are more than 36,000 foreign students from

150 countries studying in our local institutions.

Mr. Speaker Sir,

12. These achievements require a shift in the mindset of

Malaysians towards the adoption of positive values and attitudes,

especially perseverance and determination, ability to compete, to be

confident and innovative as well as resilient. We began 21 years ago

with the adoption of the Look East Policy to emulate the work ethics and

culture of the Japanese and Koreans that emphasises dedication,

discipline and loyalty as well as diligence towards attaining national

development. We also instilled the principle of clean, efficient and

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trustworthiness as well as leadership by example. The public service

has been built on the principle of efficiency, discipline and quality.

13. The Government also adopted the Malaysia Incorporated

Policy, recognizing the paramount importance of closer cooperation

between the public and the private sectors as well as the employees to

work together to achieve economic growth. The Privatisation Policy was

implemented to meet the increasing demand for public infrastructure

facilities apart from reducing the financial burden of the Government.

14. We are a country with a vision. We are almost mid-way

towards our Vision 2020 to become a fully developed nation in our own

mould. We have succeeded in diversifying our economy. We have also

achieved a paradigm shift in the mindset of Malaysians so that we can

become a more responsible, modern and progressive society, with

astute thinking skills and proud of our achievements and have

confidence in our abilities, in line with the information age.

Mr. Speaker Sir,

15. In the span of almost half a century, our ability to manage the

economy has often been put to test. Malaysia experienced its first

recession since independence in 1985, following sharp declines in

commodity prices. We experienced deficits in the balance of payments

and the Government financial account. We have not forgotten the Black

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Monday incident on 19 October 1987 when major stock markets in the

world crashed and adversely affected our stock market.

16. These experiences have made us wiser and more confident

in planning and managing our economy. The high level of economic

growth averaging more than 9% achieved during the period 1988-1996

bears testimony to our success.

17. The regional financial crisis was yet another test of our

resilience and capability. We have thwarted the attempts of international

currency speculators to impoverish the nation by devaluing the ringgit.

The Government implemented unorthodox measures and did not yield to

pressures to seek IMF financial assistance and subjecting the nation to

IMF policy prescriptions. Our measures were severely criticised then

and were said to be doomed to failure. The ringgit peg and capital

controls were strongly objected to, whilst the establishment of

Danamodal, Danaharta and CDRC were construed as bailouts of

Government cronies. On the contrary, these agencies have succeeded in

strengthening our banking system. With this success, we have gained

recognition from the world and international agencies. They are now

urging other countries to learn from our experience.

18. Danamodal had injected RM7.6 billion into 10 banking

institutions to enhance their capacity to provide loans, while more than

70% of the loans have been repaid.

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19. Danaharta has to date succeeded in reschedulling NPLs

worth RM50 billion. The NPL is currently at 6.7%. Meanwhile, CDRC

had successfully resolved 48 corporate debt restructuring cases

amounting to RM52.6 billion. Indeed with all these, we have

strengthened the banking institutions as well as restructured and turned

around companies. As such, we have also avoided fire sales of our

national assets to foreigners.

20. Our success in overcoming the financial crisis and in turning

around the economy has disappointed all our critics. Only politicians and

the mass media with vested interests refuse to acknowledge our

success.

21. Our ability to manage the economy has resulted in the nation

achieving a growth rate of 6.7% during the First Outline Perspective

Plan, OPP1 1971-1990 period and 7.1% in the Second Outline

Perspective Plan, OPP2 1991-2000 period. Consequently, Malaysians

from all walks of life have benefitted from the economic growth, with per

capita income increasing from RM1,132 in 1970 to RM13,683 in 2002.

Our purchasing power parity has also improved significantly from

US$1,247 to US$8,862. At the same time, the incidence of poverty has

declined substantially to 5.1% in 2002 from 52.4 % of total households in

1970.

22. However, we sympathise with those in some states, who

remain entrapped in poverty and sufferings in the midst of our prosperity.

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This is because the leaders whom they elected are incompetent and

incapable of bringing development to the states. Even worse, they

claimed poverty and sufferings are fated and should be accepted. They

believe that it is also fated, if Islamic states are poor, backward and

undeveloped.

Mr. Speaker Sir,

23. The success, prosperity and excellence that we have

achieved, is all due to Malaysia.

24. However, let us not be lulled into complacency. We must be

prepared to face challenges and brace ourselves for future tribulations.

25. With our capability to successfully develop and manage our

economy, Malaysia is now regarded as a model for developing countries.

Many officials and leaders from developing countries have come to learn

from our development experience. Malaysian officials have often been

invited by other countries to provide expertise and training in various

aspects of administration and development.

26. Our willingness to express our strong views on international

issues, including against injustices has inspired those who are unable to

do so. As such, Malaysia has become the spokesman for the third world

and given the honour to host and lead the Non-aligned Movement.

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27. Malaysia has also been recognised as an advanced and

progressive Islamic nation and become a model to many Islamic

countries. They are impressed by our success in building a truly

developed and prosperous Islamic nation. We have succeeded in

undertaking the jihad in many aspects of development, particularly

economic, social, religious and political and proven the capability of the

Islamic community in this age. As such, we have been chosen to host

and lead the 10th Conference of the Organisation of Islamic Countries

(OIC) in October this year.

28. To be able to voice our views effectively at international fora,

we must be proficient in the English language. In the past, Malaysian

officials have often been tasked to chair committees and lead in the

drafting of communiques at international meetings, as we were proficient

in English. To enable the nation to become a global player in the

international arena, we must master the English language. In this regard,

we have embarked on the teaching of science and mathematics in

English. These are subjects of importance in this era of information

technology. As our society progresses, our language will also be

enriched. No one will be interested to learn the language of poor and

backward people.

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CONTINUED ECONOMIC RECOVERY

Mr. Speaker Sir,

29. The Government had announced the Package of New

Strategies Towards Stimulating The Nation’s Economic Growth in May

this year. The Package focussed on four main strategies, namely

promoting private investment, strengthening the nation’s

competitiveness, developing new sources of growth and increasing the

effectiveness of the delivery system. Ninety measures were formulated

under this Package. Indeed, the impact of the Package of New

Strategies has indeed been positive.

30. The performance of the Malaysian economy since the

implementation of the Package of New Strategies is very encouraging,

with a growth of 4.6% for the first quarter of 2003. During the second

quarter, GDP growth remained strong at 4.4%, higher than expected,

despite the negative impact of the war in Iraq and Severe Acute

Respiratory Syndrome (SARS). As such, the economic performance for

the first half of 2003 has achieved the growth target of 4.5% for the

whole year. Clearly, the approach taken by the Government and the

support of all Malaysians have contributed to the stronger growth.

31. All sectors of the economy registered strong growth, with the

manufacturing sector recording the highest growth of 6.5%, followed by

mining 4.5% and services 4.2%.

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32. In terms of expenditure, private consumption continued to

increase by 3.9% during the first half of the year, while private sector

investment responded positively to the incentives provided under the

Package of New Strategies. Private sector investment is expected to

record a growth of 2%, after experiencing a sharp deceleration since the

financial crisis.

33. Notwithstanding the weak external demand, the contribution

of exports to GDP growth remained positive, reflecting the

competitiveness of Malaysian products in the international market. This

is also due to our concerted efforts to seek new markets, mainly in

Africa, South America and West Asia, apart from expanding regional

markets, especially among ASEAN countries and East Asia. This has

also reduced our dependence on traditional markets like the United

States and Europe.

34. The feel good factor has clearly returned to the share market.

The Kuala Lumpur Composite Index surged to its highest level of 756.48

points on 5 September 2003 compared with 632.43 points on 2 January

2003. Total daily transactions reached 586 million units or RM1.17

billion compared with 107 million units valued at RM0.5 billion during the

same period. The market capitalisation is now at RM581.98 billion

compared with RM473.16 billion on 2 January 2003. The buoyant stock

market has also attracted active domestic and foreign investor

participation with total transactions increasing more than three-fold.

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Mr. Speaker Sir,

35. The tourism sector in particular has recovered from the

negative impact of SARS. The preventive measures put in place by the

Government have succeeded in containing the spread of the disease. In

addition, the US-led invasion on Iraq has not adversely affected us. The

measures under the Package of New Strategies to mitigate the impact of

SARS have indeed been successful.

36. The better performance of the economy has further

strengthened the nation’s economic fundamentals. International reserves

continue to increase to RM146.9 billion or US$38.7 billion, which is

sufficient to finance 6 months of retained imports and is 4.3 times our

external short-term debts. The banking system remains strong with

several banking institutions recording good profits. The high liquidity in

the system has enabled the Government to continue with its

accommodative monetary policy, particularly with respect to the low

interest rate regime. In addition, the Government continues to mobilise

non-inflationary domestic resources without crowding-out the private

sector. As such, the Government does not have to depend on external

sources of funding to finance its development programmes. Price

increases have also been contained with the increase in the Consumer

Price Index at 1.2 %.

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37. Despite signs of improvements in the global economy, it is

unlikely that the world economy will recover to its level before the

financial crisis in the immediate term. The path to sustained recovery

remains uncertain, given the geo-political risks still prevailing. The super

powers continue to force and exert pressure to effect regime changes in

countries which oppose them. Since the September 11 incident, the

global war against terror has been used as an excuse to threaten nations

accused of sympathising and protecting terrorists.

38. This is how super powers legitimise their aggression and

oppression on countries like Afghanistan and Iraq and justify their pre-

emptive measures on other countries. Clearly, they practise the law of

the jungle. For the super powers, might is right. Their strength

legitimises everything.

39. We have repeatedly stressed that the only solution to the

geo-political conflicts is to identify the root cause of terrorism. Force and

massive retaliation will further aggravate the situation and undermine

efforts to revive the global economy.

40. The development in the global economic environment calls

for greater concerted efforts towards enhancing regional cooperation.

Stronger regional cooperation will enable us to speak with one voice.

During the Asian financial crisis, countries in the region have

demonstrated their willingness to collaborate to provide support to

affected economies. More than half of the funds mobilised to assist the

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affected economies was from this region. In addition, the ASEAN+3

countries have also mobilised billions of dollars under the Chiangmai and

the Miyazawa Initiatives. We have also pointed out the weaknesses and

shortcomings of the international financial system, which had contributed

to the Asian financial crisis.

Mr. Speaker Sir,

41. It has been more than a decade, since we proposed the

establishment of the East Asian Economic Group (EAEG). The proposal

was rejected then and even deemed to be dangerous. However, after 13

years, the proposal is considered viable and has become a reality that

will lay the foundation for greater economic, trade and financial

cooperation. We had remained steadfast in our stand despite the

opposition. If EAEG had been accepted earlier, we could have avoided

the Asian financial crisis or at least minimised its impact. Since many

years have passed since we first mooted this idea, we need to redouble

our efforts towards realising the EAEG.

42. The East Asia region has trillions of dollars in reserves, which

are largely invested in the West. It is now timely that we seek the best

alternative to maximise the use of these resources for the prosperity of

the region. In this regard, we welcome the establishment of the Asian

Bond Market Initiative (ABMI), which was initiated by the Finance

Ministers of East Asia. Under this Initiative, long-term financial

instruments will be made available to finance private sector investments.

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This will help prevent mismatch in financing as experienced during the

financial crisis, where short-term borrowings were used to finance long-

term investments. This will also avoid foreign exchange risks. To ensure

success of this Initiative, Malaysia will provide appropriate tax incentives.

In addition, we will also take the opportunity to widen the use of Islamic

financial instruments in ABMI, based on our experience and expertise in

developing the Islamic financial system.

43. Regional cooperation must be based on mutual benefits and

respect as well as equal rights and democracy. No one should be selfish

and pressure their neighbours. No one should dominate other nations

nor force others into agreements. Agreements must not be biased.

Unilateralism cannot be accepted. Instead, progress must be based on

consensus, consultations and mutual understanding. Shortfalls and

inequities among neighbours must be redressed as best possible. The

prosper-thy-neighbour principle must be the underlying thrust and

practice in relations among nations.

44. However, the action of a neighbouring nation had often

tested our patience with baseless accusations. We will not do the same.

We will continue to adhere to the principle of good neighbourliness and

fair play. When two parties are unable to resolve disputes through

negotiations, then there is a need for a third party to arbitrate. We are

willing to seek arbitration. Confrontation and war are not our way to

resolve disputes. Threatening and demeaning others are also not our

way. We do not give baseless excuses neither do we manipulate facts. It

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is our hope that our proposal for arbitration will be accepted as soon as

possible.

ENHANCING EFFORTS TOWARDS ACHIEVING EXCELLENCE Mr. Speaker Sir,

45. The external environment remains uncertain. Many people

are still living in fear, especially to travel by air, which have restricted

business transactions. Therefore, we cannot depend on the external

sector. Neither can we continuously rely on Government expenditure to

generate economic growth, as its financial resources are not unlimited.

46. As such, the private sector must resume its role as the

engine of economic growth. We must also seek new markets for our

exports. We must become a truly trading nation whereby we produce our

own goods and export directly to foreign importers.

47. When we planned to become an industrialised nation, we

were driven by the need to provide as many employment opportunities

as possible for our people. The agriculture sector was unable to generate

sufficient jobs. Only the manufacturing sector could provide significant

job opportunities.

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48. The Government did not intend to earn tax revenue from

industries. Hence, we were prepared to give tax exemptions for longer

period as long as there are employment opportunities for our people.

49. Our industrialisation strategy has been very successful. Job

opportunities are so abundant that it had led to an influx of foreign

workers into the country. Malaysians who are willing to work will always

find jobs.

50. In line with the growth in the manufacturing sector driven

especially by foreign investment, the nation’s trade has increased

rapidly. Currently, our total trade is RM760 billion equivalent to US$200

billion. We can justly be proud of our success in transforming our nation

from an agricultural to an industrial economy.

51. Malaysians have benefitted immensely from industrialisation. At

the same time, we have also acquired skills that enable us to establish

our own industries. There are many electrical and electronic products as

well as other manufactured goods which are produced by Malaysians.

When we produce our own goods, the contribution to national wealth is

higher.

52. We do not intend to reduce foreign investment but to

maximise national wealth, we must increase investments by Malaysians.

Furthermore, foreign direct investment has been declining and has

largely flowed to low-wage economies.

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53. Japan, South Korea and Taiwan have not depended on foreign

investment for their industrialisation. Their local entrepreneurs with the

support of the Government have developed their industries through

acquisition or development of their own technology. We were unable to

do so initially as we did not have adequate capital, technology,

management skills and global market knowledge. However, after we

have gained knowledge and experience in these areas, we are now able

to venture and develop our own manufacturing industries. This is evident

from the increased number of our own products, including automobiles,

lorries, buses, light trains, electrical and electronics, various types of

cranes, IT, refineries for oleo and petrochemical products as well as

construction materials and many others.

54. Our investors are less confident in venturing abroad and

prefer to focus only on the domestic market. Since our domestic market

is small, our local producers cannot reap economies of scale that will

enable them to reduce costs. We can only compete with the advanced

economies, if we produce high quality products on a large-scale basis.

As such, our producers must be bold in undertaking ventures to produce

high quality products on a large-scale for the world market.

55. Apart from manufacturing, we must also increase our

agricultural production. There are many agricultural products that can be

processed to give higher value. In addition, the tourism and education

sectors can also contribute towards national economic development.

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56. In fact, we must take stock of our existing capacity as well as

potentials in the industrial sector. There are many areas that can be

further developed to contribute to our economic growth as well as to

enable us to become a larger trading nation.

57. We trade with more than 200 countries, big and small.

However, there are many more countries that we have not explored fully

as trading partners. These include the Gulf, North Africa and other

African countries.

58. Malaysia has made a name in infrastructure development. In

the past, foreign contractors were awarded contracts to build roads,

bridges and dams. But now Malaysians are able to compete to secure

such contracts. In oil exploration and production, Petronas has

operations in more than 30 countries. We need another consortium to

undertake oil exploration, production and refining. In Malaysia, the

Government can allow another consortium to undertake the development

of marginal fields so as to gain the confidence of other countries.

59. In promoting Malaysian companies abroad, the quality and

ability of Malaysian companies are of paramount importance. We must

not allow companies which do not have the capability to seek contracts

and business opportunities abroad so as to sell them to other

companies. This will only result in the erosion of confidence in Malaysian

companies as well as our nation.

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Mr. Speaker Sir,

60. We have constructed ports and airports to provide excellent

services to our exporters and importers. In addition, our traders must

fully utilise our expressways and railways.

61. Currently, in the production of goods, not all components are

produced locally. Many are sourced from overseas. Of importance is

the brand name of the product. There are many well-known brands in the

world that have components made in Malaysia. However, these products

are not regarded as Malaysian products.

62. We must also have Malaysian brands even though they may

use components from other countries. It is also necessary to create as

well as design Malaysian brands that can be marketed abroad. Western

brands are not always necessary. Today, Hitachi, Honda, Toyota,

Hyundai, Samsung and many others are well known in the world. It is,

therefore, not impossible for Malaysian brands in our language to be

accepted globally.

63. We must further enhance our trade by exporting goods and

services produced by Malaysians. However, we do not have to reduce

the export of goods by foreign investors in the country. The involvement

of Malaysians in the production of all goods and services in industries

must be increased. They must also manage by themselves all aspects of

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trade, both for domestic and foreign markets. The Government will

provide support in terms of putting in place appropriate policies and

funds as well as improving the delivery system.

Strengthening Small and Medium Industries

Mr. Speaker Sir,

64. The Government continues to give focus on the development

of small and medium industries (SMIs) as part of its efforts to promote

private investment. SMIs will be further developed not only to support

large domestic industries, but also to produce components for industries

abroad. The Government has established a Micro-Credit Scheme under

the Package of New Strategies to provide easier accessibility to loans for

small entrepreneurs, such as farmers, cattle rearers, night market

traders, hawkers and others. The response to the Scheme has been

overwhelming.

65. To date, Bank Pertanian Malaysia (BPM) and Bank

Simpanan Nasional (BSN) have received almost 88,000 applications

worth RM1.4 billion, of which nearly 42,000 applications valued at

RM430 million have been approved. Loan repayments have also been

encouraging, with almost 86% of schedulled repayment being received.

The Government is encouraged with this response. However, there are

a few who have abused and misused this facility. To those who have

received these loans, they must ensure that they repay on schedule. We

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must be reminded by the saying of the Prophet that it is indeed a cardinal

sin for one to leave debts behind upon death, with no one to settle them.

Stimulating Private Consumption

66. One of the measures to stimulate economic activities is to

encourage greater domestic consumer spending. Every ringgit that is

spent will generate significant multiplier impact on the economy.

Towards this end, the Government has introduced various measures to

increase disposable income through tax cuts and provision of incentives,

reduction in the employee’s contribution to EPF as well as providing

bonus for Government employees when our financial position permits. In

addition, our national savings rate at 32% further strengthens our

financial position. The ringgit peg has ensured stability in our purchasing

power.

67. The ability to balance savings with investment reflects sound

financial management. This is the best financial practice.

Enhancing Competitiveness to Face Challenges of Globalisation

Mr. Speaker Sir,

68. Globalisation as presently interpreted means the free flow of

trade across boundaries. The Government cannot intervene in the

market system. The market is supposedly able to regulate itself.

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69. In fact, the market is only interested in reaping huge profits.

As such, the developed countries have formed larger companies and

banks to overcome competition by traders of developing countries. It is

not possible for the small companies and banks in developing countries

to withstand the onslaught of giant companies when they have access to

domestic markets as a result of globalisation. This is not a level playing

field. Once again, might is right is the belief of the day.

70. We support globalisation but not as advocated by the West.

We must have our own interpretation of globalisation, which we will

pursue relentlessly until its acceptance in WTO.

71. We must persevere and stand up to face these challenges.

We must enhance our sovereign competitive edge to enable us to

compete with global players in the international market. This can only be

achieved through increasing productivity, reducing the cost of doing

business, acquiring technology and be more innovative. Efforts to

improve the effectiveness of the public sector delivery system have

contributed towards the efficient implementation of Government

development policies and strategies. In addition, measures must be

taken to effect a shift in the mindset of Malaysians to enable us to

become more competitive.

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BUDGET STRATEGY 2004

Mr. Speaker Sir,

72. The Government has taken prompt and bold measures to

implement policy shifts from growth that is solely based on exports to

domestic-led growth. The shift in policy has succeeded in preventing the

country from experiencing recession. As such, the thrust of the 2004

Budget will continue with policies and strategies to stimulate and

accelerate domestic economic activities, with greater participation of

Malaysians in economic growth. However, the Government cannot

continue to be the engine of growth. As such, the Government

introduced the Package of New Strategies to enable the private sector to

resume its role as the engine of growth.

73. Taking these into consideration, the 2004 Budget will focus

on the following strategies:

First : Accelerating domestic private sector and

stimulating the services sector to spearhead

economic growth.

Second : Implementing fiscal consolidation towards a

balanced budget in the near term.

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Third : Implementing monetary policy that can support

and harness private consumption and investment.

Fourth : Enhancing the nation’s competitiveness to enable

Malaysia to become a truly trading nation.

Fifth : Strengthening the social agenda and caring

society to enhance the quality of life and well-

being of Malaysians.

First Strategy: Domestic Private Sector as the Engine of Growth

Mr. Speaker Sir,

74. During the ten years prior to the financial crisis, the private

sector had been successful in driving economic growth with their

investment expanding by more 21% per annum. A major contributor to

this growth was from foreign direct investment (FDI), particularly in the

manufacturing sector. Indeed, almost 90% of our exports are goods

produced by foreign companies in Malaysia.

75. Foreign companies in Malaysia finance their investments

largely from our domestic sources. As such, the inflow of foreign capital

into the country is actually smaller than perceived. Furthermore, these

companies do not produce Malaysian brands, have low backward and

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forward linkages and utilise foreign technology developed abroad. The

main contribution of FDI has only been in terms of job creation. But

today, since Malaysians are fully employed, it only benefits foreign

workers.

76. We must change all these and be bold enough to transform

the economy from being FDI-driven to domestic-led investment. We

must act immediately to make a quantum leap to become the nation’s

investor, producer and exporter. Our domestic private sector must

develop and produce Malaysian brands of world-class quality, able to

penetrate international markets. We must export goods, which we

produce ourselves. We must promote private sector initiatives to

produce local products with high value creation, beginning from our own

research findings to utilising local components as well as domestic

logistics. This will ensure wider spin-off effects and higher wealth

creation for all Malaysians.

77. We must redouble our efforts to become a global trader by

promoting Malaysian products directly to a wider international market, in

particular non-traditional markets. As one of the strategic measures

towards this goal, MATRADE will be corporatised. MATRADE will bring

in expertise from the private sector, including expatriates in the

promotion of exports. For this purpose, the Government will provide a

launching grant of RM100 million. MATRADE will immediately undertake

roadshows, including export promotion on wheels to the Middle East and

Africa. In addition, the Government will also encourage private sector

28

initiatives to establish trading houses for our exports. The Government

will identify and assist capable individuals and private companies to

undertake these initiatives.

Mr. Speaker Sir,

78. SMIs can contribute to economic growth. They also have the

potential to produce high quality and value-added products, which can be

exported. A strategic direction for the development of SMIs must be

formulated not only to enable them to be the backbone of large industries

but also able to export their own products abroad. Towards this end, a

High-Level SMI Council has been established to formulate

comprehensive policies and strategies to ensure a more integrated

development of SMIs in all sectors.

79. To encourage SMIs to increase their investments, the

Government proposes to increase the threshold of chargeable income

that is subject to a corporate tax of 20% as announced in the 2003

Budget, from RM100,000 to RM500,000. With this increase, SMIs will

have an additional RM322 million for reinvestment.

80. To further strengthen the role of private sector, the

Government proposes the following measures:

i. providing existing locally owned companies, which

reinvest in the production of machinery and equipment,

29

including heavy machinery and machine tools, with the

following incentives:

a. Pioneer Status with tax exemption of 70% on the

increased income from reinvestment for a period of 5

years; and

b. Investment Tax Allowance of 60% on the additional

investment for a period of 5 years;

ii. enhancing incentives for companies producing goods

using oil palm biomass as follows:

a. increasing the rate of income tax exemption under

Pioneer Status from 70% for 5 years to 100% for 10

years; and

b. increasing the rate of Investment Tax Allowance from

60% to 100% for 5 years;

iii. providing existing companies using oil palm biomass with

the following incentives:

a. Pioneer Status with tax exemption of 100% for 10

years on the increased income from reinvestment;

and

30

b. Investment Tax Allowance of 100% for 5 years on

additional investment;

iv. improving tax incentives for companies in Sabah, Sarawak

and the eastern corridor of Peninsular Malaysia as follows:

a. increasing the rate of income tax exemption under the

Pioneer Status from 85% to 100%; and

b. increasing the rate of Investment Tax Allowance from

80% to 100%. This allowance can be fully deducted

and not limited to 85% of the statutory income; and

v. exempting tax on income remitted from abroad by

individuals, as presently enjoyed by companies. It is

hoped that this measure would encourage individuals to

remit their income from their investments or savings

abroad for domestic investment.

81. To further promote the development of private venture capital

companies, the venture capital fund for Malaysian Venture Capital

Management (MAVCAP) will be increased by RM300 million, thereby

increasing the total amount of funds under MAVCAP to RM800 million. In

addition, the Government has established the Malaysian Debt Venture

(MDV) with a fund of RM650 million and the Malaysian Technology

31

Development Corporation (MTDC) with a fund of RM1 billion to finance

investment in areas, such as logistics and modernisation of agriculture.

82. The Government has also granted income tax deduction to

venture capital companies equivalent to their investments in venture

companies, provided the shares in venture companies are disposed

through initial public offerings (IPOs). To further enhance this incentive,

tax deduction will be allowed for shares disposed through other approved

exit mechanisms, such as put option and management buyout.

83. Apart from this, the method of computing the 70% investment

in venture companies will be relaxed to take into account the amount of

funds invested instead of the total funds of the venture capital company.

84. In addition, the Government also proposes that venture

capital management companies be given tax exemption on income

received from profit sharing agreements with venture capital companies.

Stimulating the Services Sector

Mr. Speaker Sir,

85. The services sector is a major contributor to economic growth

and foreign exchange earnings. The potential sources of growth in this

sector has yet to be fully exploited to produce high value-added services,

32

especially those services related to manufacturing, education, tourism,

transportation and logistics as well as ICT.

86. In the past, the flow of FDI had focussed on the

manufacturing sector. We must now undertake efforts to attract FDI to

the services sector, especially those with high value-added potentials

through incentives. In the Package of New Strategies, we have further

relaxed equity conditions, apart from providing many tax incentives to

attract services-oriented companies, such as Operational Headquarters

(OHQs), Regional Distribution Centres (RDCs) and back-room

outsourcing operations by multinational companies (MNCs) to operate in

this country.

87. The Multimedia Development Corporation (MDC), as a one-

stop shop for investment in the MSC has succeeded in attracting many

local and foreign companies to invest in ICT. For companies granted with

MSC status, the Government has given 10 commitments under the Bill of

Guarantees, including the provision of infrastructure, freedom of

ownership and sourcing of funds as well as recruitment of knowledge

workers, regardless of citizenship.

88. MDC has successfully attracted and encouraged companies

to provide shared services, especially for IT support services for their

global operations, including information and data processing centres.

Recently, Ericsson established its headquarters here, while HSBC and

Standard Chartered Bank, among the largest banking and financial

33

institutions in the world, set up their electronic data processing offices to

provide back-end processing and customer contact services to their

groups worldwide. Shell, a major petroleum company in the world and

also DHL have created similar services in MSC. These activities have

succeeded in providing employment opportunities for highly qualified

Malaysian professionals.

89. To further stimulate the services sector, it is timely that a one-

stop agency be set up to hand-hold and guide investors in obtaining

approvals from various authorities, with the view to expediting their

project implementation. In view of the success of MDC in developing

MSC, the Government will expand its role to become a one-stop agency

ala MIDA for selected services sectors. We are confident that MDC will

be able to undertake its new role effectively.

90. The financial sub-sector, with a contribution of 14.5% to the

GDP, is one of the major components of the services sector. In line with

the objective to make Malaysia a regional financial centre, the

Government will allow Labuan offshore companies to establish their

marketing offices in Johor Bahru, which is rapidly developing with the

increasing number of MNCs that have relocated their operations there.

This measure will also complement the Government’s efforts in making

the Port of Tanjung Pelepas and the Senai Airport as an international

logistics hub.

34

Mr. Speaker Sir,

91. To further enhance the incentives for OHQs, the Government

proposes that income derived by OHQs from the provision of services to

its related companies in Malaysia, will be given income tax exemption

not exceeding 20% of its total income from its global operations. This is

similar to the incentive currently enjoyed by RDCs.

Promoting Malaysian Industries In The Global Market

Mr. Speaker Sir,

92. While the nation’s exports are high, we must focus on the

production of goods and services by our domestic entrepreneurs for both

the domestic and export markets. If we ourselves are not keen to buy our

own locally produced goods and services, it will be difficult for our

producers and businessmen to market their products abroad. Efforts to

develop domestic products with export potentials must be made an

important national agenda. To further promote local products, a Fund for

the Development and Promotion of Malaysian Brands has been

established with an initial allocation of RM100 million. The Government

will further increase the Fund by an additional RM100 million.

93. To enhance demand for local goods and services, the

Government and the private sector must together increase the

consumption of local products to ensure these products have a strong

35

domestic market base. In other countries, the domestic market has

provided the base for local industries to venture into the global market.

We must emulate these countries to spearhead the growth of our

domestic industries.

94. In order to promote domestic heavy industries, the

Government will continue to support such industries. Since February

2003, sales of passenger cars have been declining, as consumers are

postponing their purchases in anticipation of lower prices on imported

cars when the automotive sector is liberalised under AFTA. The

Government has indicated earlier that the prices of cars will not be

lowered even after the reduction of import duties on cars from ASEAN

countries. To mitigate the loss in revenue, the Government proposes to

levy excise duties on imported cars when import duties are reduced from

1 January 2004. Therefore, consumers are encouraged to purchase cars

now for themselves and their families.

95. The Government will also review its procurement system.

Presently, the evaluation of Government tenders focusses on two

aspects, namely technical and financial. To provide a market base for

our entrepreneurs, the use of local content and value-added will be given

due consideration in the Government’s tender evaluation.

96. The agenda to promote domestic industries is of utmost

importance. As such, the Government will require Tenaga Nasional,

Telekom, Proton and Petronas as well as the stable of companies under

36

Khazanah and PNB and other Government companies to spearhead the

development of domestic products and technologies in their respective

sectors. These companies must take advantage of their domestic market

and their global network as well as funds to promote domestic industries,

capable of competing in the international market. In line with this policy,

the vendor and umbrella system will be reviewed.

97. The Government hopes that our private sector companies will

take this challenge and work towards developing domestic industries that

can compete globally. In this regard, the Government will ensure a

conducive environment, including development of R&D, provision of

funds, increased promotional and marketing efforts, provision of logistics

services and improved public sector delivery system, in line with the

objective of achieving sovereign competitiveness.

98. The Government is committed to the New Economic Policy

(NEP) launched in 1971, including the creation of a Bumiputera

Commercial and Industrial Community or BCIC, to provide opportunities

for Bumiputera to succeed as entrepreneurs. The policy has produced

many successful Bumiputera entrepreneurs and corporate leaders.

However, the financial crisis had adversely affected them. This is one

aspect of the NEP that has not been fully achieved. As such, the

Government through its own companies will intensify efforts towards

achieving this objective, especially through the vendor and umbrella

system, which will be reviewed.

37

99. In this regard, we strongly oppose the agenda to open up

markets for Government procurement, which is being discussed at the

WTO forum in Cancun. Once again, the West is using the WTO to push

forward their agenda for economic colonisation. If we do not oppose this

agenda, our efforts to implement the National Development Policy, which

safeguards the interests of domestic entrepreneurs, including

Bumiputera as well as the objective of promoting domestic industries, will

not be achieved.

100. To enable us to produce quality products that can compete in

the global market, we must have appropriate technologies as well as

develop our own patents and brands. Apart from developing our own

technologies, patents, products and brands, we can also acquire them

from abroad. In the automobile industry, we have succeeded in acquiring

Lotus, while in the aerospace industry we have acquired Eagle and

Lance Air (USA), which produce twin and four-seater aeroplanes using

composite materials. InventQJaya was also established to promote a

society of inventors that can develop new frontier technologies.

Recently, we have also acquired the MM chip from a Japanese R&D

company, FEC Incorporated. The MM chip is the smallest in the world

measuring 0.25 square milimetres. In addition, Malaysian-owned

companies have also been successful internationally, such as fashion

design and shoes. Malaysians also own the London Circus, the largest in

the world, as well as Laura Ashley and Crabtree & Evelyn and others.

38

101. To enable Malaysians to venture into latest technologies,

measures are being taken to develop the aerospace industry. Three

years ago, the Government successfully launched Tiungsat and will soon

launch the Razaksat. This success will enable us to launch additional

satellites, including low-orbit equatorial satellite and the possibility of

establishing Malaysia as a rocket launching centre. We also hope to

send the first Malaysian astronaut into space. Malaysia Boleh.

Second Strategy: Fiscal Consolidation Towards A Balanced Budget

Mr. Speaker Sir,

102. When the 8thMP was formulated, the Government had

targetted achieving a balanced budget by 2005. However, the sharp

decline in private sector activities following the regional financial crisis,

uncertainties in the external environment, including the September 11

incident, geo-political tensions in the Middle East, war in Iraq and the

outbreak of SARS, had necessitated the Government to implement

several stimulus packages to revitalise domestic economic activities to

prevent the economy from going into recession. As such, the objective of

a balanced budget cannot be achieved in 2005. However, the

Government remains committed to achieve a balanced budget in the

near term by implementing fiscal consolidation measures.

Notwithstanding this, the public sector account remains strong, with the

public sector deficit below 1.5% of GDP in 2003, significantly lower than

39

the 3% set for the euro region. The increase in public sector deficit is due

to large investments by Petronas in 2003.

103. Government expenditure will focus, especially on the

provision of more efficient infrastructure facilities to reduce the cost of

doing business and support economic growth. Allocations will continue to

be provided for the implementation of programmes to improve the socio-

economic well-being of Malaysians. In this regard, emphasis will be

given to the provision of goods and social services for the benefit of all

Malaysians, especially the lower income group.

104. To ensure effective distribution of Government funds,

allocations to Government agencies will be based on their financial

positions. Agencies with high uncommitted reserves will have to utilise

their reserves to finance their programmes.

Streamlining Budget Preparation and Implementation

105. To streamline Budget preparation, the Government has

implemented the two-year budget preparation and examination since

Budget 2002. This process has enabled the preparation of a rolling plan,

which incorporates current and following year budgetary requirements. It

also shortens the time and reduces man-hours required for budget

examination and thus, enables agencies to focus on implementation.

40

106. The adoption of the two-year budget has contributed towards

expediting the implementation of development projects where agencies

have lead time to undertake project planning. With the speedier

implementation of development projects, there is no shortfall in

expenditure as in previous years.

Budget Allocation 2004

107. In line with the fiscal consolidation policy, the Government

proposes an amount of RM112.5 billion be appropriated for, in the 2004

Budget. This represents a reduction of 1.6% compared with an

expenditure of RM114.3 billion in 2003. Based on an estimated revenue

of RM95.6 billion, the overall Federal Government deficit is expected to

be reduced to 3.3% of GDP compared with 5.4% in 2003.

108. A major portion of the proposed allocation, that is RM80.5

billion or 71.6% is for Operating Expenditure while RM30 billion is for

Development Expenditure. A sum of RM2 billion is allocated for

contingency reserve.

109. Under the Operating Expenditure, a sum of RM20.9 billion is

for Emoluments, RM17.2 billion for Services and Supplies and RM39.4

billion for Fixed Payments and Grants, RM0.8 billion for purchase of

office equipment and facilities and RM2.2 billion for other expenditures.

41

110. Of the proposed Development Expenditure, a sum of RM13.8

billion or 43.1% is allocated for the economic, infrastructure and

industrial sectors as well as rural electricity and water supply

programmes. A sum of RM11.2 billion or 34.9% is for the social sector,

that is education and training, health, welfare, community development,

youth and sports projects. In addition, a sum of RM2.7 billion or 8.4% is

for development projects in the security sector and RM4.3 billion or

13.6% for general services.

Education

Mr. Speaker Sir,

111. The Government will continue to give priority to the education

sector with an allocation of RM20.2 billion or a quarter of operating

expenditure in 2004. Among the educational institutions, which are

expected to commence operations are 44 primary, 43 secondary and 3

technical schools as well as 59 hostels. As announced in the Package of

New Strategies, 4 education promotion offices will be operational this

year in Dubai, Ho Chi Minh, Beijing and Jakarta.

112. Under the Development Expenditure, a sum of RM3.7 billion

is provided, including RM1.8 billion for primary and secondary schools,

hostels and teachers’ quarters. A sum of RM637 million is allocated for

school computerisation programmes while RM490 million is for financing

infrastructure requirements of public institutions of higher learning.

42

113. Last year, the Government decided to implement the

teaching of Science and Mathematics in English using ICT. This

programme involves an expenditure of RM5 billion for the 8thMP period.

The Government will also roll-out smart school programmes in stages

and implement the Schoolnet project to enable students to gain wider

internet access. This programme has been implemented in almost 200

schools in remote areas of Sabah and Sarawak.

114. In line with the Government’s objective to provide compulsory

basic education for all children, a Trust Fund for Poor Students was

launched on 23 July 2003. An amount of RM200 million is allocated to

the Fund to assist poor students to continue with their education.

115. To enhance the quality and standard of franchised education

programmes, the National Accreditation Board, will invite lecturers or

experts from public or private institutions of higher learning to assist in

undertaking validation, moderation or accreditation of the programmes.

This is to ensure that the quality of courses offered are at par with those

from foreign universities. For this purpose, the Government proposes

that fees or honorarium received by these lecturers or experts who assist

in validation, moderation or accreditation, be exempted from income tax.

116. To reduce the financial burden of graduates in loan

repayment to Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN),

the Government will reduce the rate of interest on loans from 4% to 3%.

43

The repayment schedule will commence on the third year after the

graduate is employed. In addition, the repayment schedule will also be

restructured to enable borrowers to repay their loans at 5% of their

monthly income for the first 5 years and 10% for the balance of the

repayment period. This facility will also be extended to borrowers under

the Skills Development Fund. For students who wish to pursue Islamic

studies in institutions of higher learning abroad, they will also be able to

borrow from PTPTN on the condition these institutions are recognised by

the Government and they must enrol in academic subjects. They must

also possess qualifications recognised by the Government. The amount

of loans should not exceed the cost of similar courses in local

institutions. Apart from this, the Government will also consider extending

this loan facility to students pursuing twinning programmes abroad for

the final year of their studies in institutions of higher learning recognised

by the Government and in courses encouraged by the Government.

Skills Training

117. The development of technology and knowledge-based

industries requires more trained manpower. For this purpose, the

Government will continue to give emphasis on increasing the quality and

quantity of skilled manpower by further expanding existing facilities and

building new skills training centres. An allocation of RM319 million is

provided under the Ministry of Human Resources (MHR) for this

purpose. With an additional 10 new training institutions, MHR will have

the capacity to train 17,000 trainees in various skills. A sum of RM245.5

44

million is also allocated to provide additional facilities and build 25

National Youth Skills Institutes that can train 11,000 trainees. A sum of

RM77.5 million is provided to complete 14 existing institutes and build 3

new institutes and RM107.3 million to meet the management costs of

Mara Skills Institutes.

118. The Government launched the Skills Development Fund

under the Package of New Strategies with an amount of RM500 million

to increase the supply of skilled manpower. The Fund provides loans to

trainees from skills training institutes, such as Industrial Training

Institutes, MARA Skills Institutes, National Youth Skills Institutes and

other selected private institutes. To manage this Fund, a special agency

ala PTPTN will be established. The loan condition under this Fund is

similar to that of PTPTN, with an interest rate of 3%. The monthly

repayment schedule will be made in stages.

119. To further expand technical training facilities, an engineering

training centre for Computer Numerically Controlled (CNC) machines has

been established at the Technology Park Malaysia. This Centre provides

training on the use and design of CNC machines for various industries,

especially components and spare parts. This training will contribute

towards the upgrading of skills in CAD/CAM/CAE.

120. Community colleges will also provide vocational training.

Pusat Giat MARA will be upgraded as Community Colleges with

emphasis on vocational training with the view to providing more skills

45

training opportunities. Government-owned companies, such as TNB and

Telekom will also provide technical and vocational training at their

training centres. Participants in these training programmes can obtain

loans from the Skills Development Fund. In addition, to encourage

employers to hire unemployed graduates registered with the Economic

Planning Unit (EPU), the Government proposes that expenses incurred

by employers in employing these graduates be given double tax

deduction for a period of 2 years. For unemployed graduates requiring

retraining, they can obtain financing from the Retraining Fund under the

Package of New Strategies.

Research and Development (R&D) Mr. Speaker Sir, 121. The Second National Science and Technology Policy was

formulated to achieve R&D expenditure of at least 1.5% of GDP by 2010.

Towards this end, the Government has provided substantial allocation to

develop expertise and expand R&D facilities. To continue with these

efforts, a sum of RM183.6 million is allocated for the Intensification of

Research in Priority Areas (IRPA) programme, specifically for public

research institutions in collaboration with the private sector. In addition,

three new research institutions will be established in the BioValley,

Cyberjaya, specifically in biotechnology. The Government will encourage

large companies to locate in the BioValley to undertake contract

research as part of the efforts to further develop the services industry.

46

122. Our R&D efforts have contributed significantly to increases in

yield of commodities, especially oil palm and rubber. The yield of

commodities per hectare has doubled and their maturity period

shortened. Apart from increasing output, research institutions have also

undertaken downstream research, such as biodiesel from oil palm and

rubber thermoplastic.

123. In the light of declining contribution of commodities to the

economy, it is timely that R&D institutions refocus their efforts towards

greater demand and market-driven R&D that emphasise value-added or

value creation, with the view of commercialising their research findings.

For example, the global market for healthcare and life sciences products

and services is expected to reach 4 trillion euros while pharmaceuticals

30 billion euros by 2006. In Malaysia, biotechnology is still an infant

industry. Although currently there are about 60 biotechnology

companies, they are still small and have yet to reach world-class status.

124. The Government will restructure SIRIM to become the focal

point to match R&D with market demand. SIRIM will identify the

requirements for new products and technology for both the domestic and

global markets. It will also study the whole R&D value chain to create

value, including niche activities to be developed, such as logistics,

packaging and marketing.

47

125. The Government through SIRIM will also identify R&D

requirements based on market demand and match them with R&D

capacity in universities and research institutions. As this represents a

long-term investment in developing our local technology to produce high

quality Malaysian brands, the Government will provide adequate funds

for this purpose. The nation has the expertise and capacity to undertake

R&D to meet market demand. For example, we have more than one

thousand doctorates, apart from adequate facilities and funding for R&D.

126. To promote the commercialisation of research findings, the

Government proposes that income received by researchers from such

activity be given tax exemption of 50% for 5 years. At the same time, the

Government will not impose charges on patents registered by local

researchers.

Tourism

Mr. Speaker Sir

127. The tourism sector, especially hotel and tour operators, has

been adversely affected by the Iraq war and the outbreak of SARS. To

assist them, the Government had implemented prompt measures under

the Package of New Strategies, such as the deferment of income tax

payment by tour agencies, discounts on electricity bills to hotel operators

and the provision of the Special Relief Guarantee Facility.

48

128. To encourage operators in the tourism industry, including

hotel operators, to undertake expansion, modernisation and renovation,

the Government proposes that a second round of Pioneer Status or

Investment Tax Allowance be given.

129. Hotel operators should work together to set up tourism

information centres at all entry points, including airports as well as major

railway stations to enable tourists to make hotel reservations upon

arrival. They are also encouraged to provide on-line reservation facilities.

For this purpose, the Government will develop portals and provide

access to these portals at airports, railway and bus stations throughout

the country.

130. The Government will continue to undertake more effective

tourism promotion efforts together with Malaysia Airlines and AirAsia as

well as tour agencies. For this purpose, the Malaysian Tourism

Promotion Board (MTPB) will be restructured to undertake a more

systematic and effective marketing and communications programmes. In

addition, promotional efforts will focus on regional markets, especially

China, Taiwan, Hong Kong, India and ASEAN countries. Promotional

efforts will also be intensified in the West Asian market and new markets

such as Pakistan, Indo-China and New Zealand. In this respect, a sum of

RM215 million will be allocated for promotional activities.

131. The Government has also established tourism funds

amounting to RM1.1 billion, that is RM400 million under the Special

49

Tourism Fund and RM700 million under the Tourism Infrastructure Fund.

Both these funds are managed by Bank Pembangunan dan Infrastruktur

Malaysia (BPIMB). Priority will be given to the financing of new tourism

products. To increase its effectiveness, the Government through the

Ministry of Finance will monitor its implementation with respect to

approvals and disbursements of the funds.

132. Malaysia Truly Asia. This theme does not only reflect the

multi-ethnic and multi-cultural society but also the variety of Malaysian

cuisine, which has become a tourist attraction. We have Bintang Walk,

Bangsar Baru and Mon’t Kiara, where tourists spend their time along

sidewalk cafes. Such places have also become the happening place. In

this regard, we must also ensure our food traders have stalls that are

attractive, clean and hygienic. Towards this end, the Government has

provided micro-credit facilities to enable them to replace their stalls with

new pushcarts made of stainless steel as well as colourful canopies and

proper tables and chairs ala Bintang Walk. In this regard, traders will only

be allowed to use stalls or pushcarts approved by Local Authorities.

Health

Mr. Speaker Sir,

133. The Government will continue to provide quality medical

services to all Malaysians. Hence, the Government will allocate a sum of

RM9 billion, an increase of 20.5% from 2003. Of this, RM6.4 billion is for

50

operating expenses and RM2.6 billion for development expenditure. This

allocation is for the provision of essential medical treatment services,

such as dialysis, intensive care and programmes to reduce morbidity and

mortality among children. To increase the diagnosis and monitoring of

infectious diseases, such as SARS, tuberculosis, leprosy and dengue,

the Government will provide a sum of RM3 million.

134. The cost of medical treatment is rising. The Government

subsidises health services to ensure Malaysians are charged at

minimum rates. However, this has become an increasing financial

burden for the Government. To assist the Government to reduce this

burden, the health insurance industry is encouraged to widen its

coverage by providing lower premiums, which are affordable to a

majority of Malaysians. In addition, companies must also bear the

medical costs of their employees.

135. The Government has built many hospitals with modern and

sophisticated equipment, including the application of ICT for the

paperless Total Health Information System (THIS). This includes

Hospital Selayang, Serdang and Pandan in Johor. The Government is

not able to provide high remunerations for medical specialists. As such,

the Government has agreed to set up private commercial wings in

Government hospitals, to enable serving doctors to enjoy better

remunerations and thereby, continue to serve with the Government.

Through these measures, the Government also hopes to attract

specialists who have left the service to return and serve in Government

51

hospitals. In addition, this will enable those seeking better medical

treatment to obtain such treatment at reasonable charges in Government

hospitals. It will also enable our Government hospitals to be promoted

abroad, in line with the objective to encourage health tourism.

136. Healthcare is vital to ensure the well-being of the people. To

improve healthcare, the Government proposes that import duty of 10%

on health supplements be abolished. The Government shall also ensure

prices of selected medicines be provided at a discount to pensioners. In

this matter, Pharma Niaga will provide a special counter for this purpose.

137. At the same time, to encourage healthy lifestyle among

Malaysians, the Government proposes that import and excise duties on

cigarettes and other tobacco products be increased by 20%, from

RM216 to RM259 per kilogramme and from RM48 to RM58 per

kilogramme, respectively. This increase is in line with World Health

Organisation’s proposal to discourage smoking. To curb smuggling of

cigarettes, the Government is implementing the use of special stickers or

banderol and security ink.

138. The Government also proposes that import and excise duties

on liquor be increased by 10%. In addition, the Government will also

implement the use of banderol and security ink on liquor.

139. The Government would like to take this opportunity to

congratulate and record our appreciation to all medical staff who had

52

sacrificed and took risks during the screening of visitors and treating

SARS patients. The special allowance provided is only a small token of

the Government’s appreciation. It cannot compare with their untiring

efforts and unwavering dedication in carrying out their duties. We all

should emulate them.

140. Even though the SARS outbreak has ended, we must

continue to be vigilant and be prepared in case of recurrence. The

Government will continue with its efforts to put in place measures to

prevent such diseases. In this regard, the Government will expedite the

establishment of the Centre for Disease Control (CDC), as announced in

the Package of New Strategies. A sum of RM20 million is provided for

this purpose.

Rural Development

Mr. Speaker Sir,

141. Efforts to enhance the standard of living of the rural

community will be continued. A sum of RM2.27 billion is provided for

rural development, of which RM450 million is for the construction of

village roads, while a sum of RM260 million for the completion of 74

continuation and new projects. An amount of RM267.1 million is provided

for the completion of rural clinics.

53

142. A sum of RM225.4 million and RM272 million is allocated for

the rural water and electricity programmes, respectively to benefit almost

140,000 households throughout the country. An allocation of RM7.9

million is provided for water projects as well as programmes to ensure

clean environment in rural areas. The coverage of potable water supply

has reached 99.9% for Peninsular Malaysia. In addition, RM242 million is

allocated to provide water supply to rural schools.

143. To reduce the financial burden of low-income groups, the

Government proposes that motorcycles of engine capacity not exceeding

150 c.c. be exempted from road tax. This will also reduce the financial

burden of youths and students in institutions of higher learning. The

Government also proposes that road tax on buses for workers, be

reduced by 50%. Employers are expected to pass on this benefit to their

employees.

Development of Sabah and Sarawak

Mr. Speaker Sir,

144. As in previous budgets, the development of Sabah and

Sarawak will continue to be given emphasis. A sum of RM5.9 billion and

RM5.5 billion is allocated to Sabah and Sarawak, respectively. These

states will have wider road networks connecting major towns. Presently,

several towns in Sabah can only be reached by air or river transport.

However, with the completion of these projects, all towns will be

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connected by road. In Sarawak, major road networks are being

constructed to facilitate communications not only in Sarawak but also

between Sabah and Sarawak. New bridges will also be built to replace

old ones to ensure greater safety. Apart from this, the implementation of

rural and village roads is being accelerated and being undertaken by

local contractors of all classes.

145. Given that Sabah and Sarawak are large states, several air

and sea transportation projects are being implemented. Apart from the

newly completed airports of Tawau, Bintulu and Miri that can

accommodate Airbus 330, the Kuching airport will also be upgraded. The

Bintulu and Kuching ports are also being expanded. The Government will

also build a new port in Semalanjau to cater for the aluminium smelting

plant. The plant, an investment from the Middle East, will also utilise a

large portion of electricity produced from the Bakun Hydroelectric project.

146. In the education and health sectors, Sabah and Sarawak will

also be given significant allocations to implement projects, such as

Phase 2 of the Universiti Malaysia Sabah and the construction of the

UNIMAS permanent campus in Samarahan. The Government has taken

over the Sabah Medical Centre from the private sector, which will be

upgraded to become a major hospital in Kota Kinabalu. In addition, with

the view to increasing the number of doctors and allied health services

personnel, the Kuching hospital will be upgraded to become a teaching

hospital for UNIMAS.

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147. Sabah and Sarawak have not enjoyed full coverage of rural

water supply. As an interim measure, the Government has implemented

rural water supply programmes, especially in schools, using rain

harvesting and tube well system. To date, almost 700 schools in Sabah

and Sarawak have been identified to benefit from these facilities, with a

cost of RM242 million.

Agriculture

148. The Government will continue to give emphasis to further

modernise the agriculture sector, in particular programmes to increase

food production. Towards this end, large-scale mixed farming will be

promoted, including animal husbandry, intensive farming as well as the

use of modern technology and management. To further promote greater

value-added chain in the agriculture sector, activities such as processing,

logistics, packaging, developing brand names and securing new markets

will be supported and encouraged. Towards this end, all activities in the

value chain, including delivery system, will be strengthened, particularly

the provision of cold storage chain facilities for perishable agricultural

products.

149. Companies which provide these facilities and services can

also utilise venture capital funds available from MTDC. In addition, new

companies which provide cold chain facilities and services for perishable

agricultural produce are given Pioneer Status or Investment Tax

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Allowance. To promote reinvestment in this field, the Government

proposes that existing locally owned companies be granted the following

incentives:

i. Pioneer Status with tax exemption of 70% on the

increased income from reinvestment for 5 years; and

ii. Investment Tax Allowance of 60% on the additional

investment for 5 years.

150. The Government has already established the Fund for Food

totalling RM1.3 billion under BPM to finance the production and

processing of food products. To date, this Fund has been fully utilised.

In view of the good response, the Government has provided an

additional RM1 billion under the Package of New Strategies, bringing the

total Fund to RM2.3 billion.

151. To further stimulate rural economic activities and assist small

entrepreneurs in villages, the Government will establish the Village

Micro-Credit Scheme amounting to RM1 billion under BPM. To ensure

efficient and effective implementation of this programme, this credit will

be provided on group basis through the Village Development Committee

for villages, which are involved in the one product one village

programme. The implementation of this Scheme will be supervised by

the District Development Committee and the Implementation and

Coordination Unit, Prime Minister’s Department. The objective of the

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Scheme is to provide opportunities to farmers to gainfully utilise their free

time and increase their income.

152. An allocation of RM3.3 billion is provided for operating and

development expenditure for the agriculture sector. Of this, RM885

million is for the provision of basic agricultural facilities. In addition,

aquaculture farming will be expanded, with an allocation of RM70.6

million, while RM165 million is for the construction of an Integrated Deep

Sea Fishing Port and a Fisheries Training Centre in Tanjung Manis,

Sarawak.

Increasing Orang Asli Participation in Mainstream Development

153. The Government continues to undertake programmes with

the view to enhancing greater participation of orang asli in national

economic development. As a measure to increase their income, the

Village Micro-Credit Scheme will also be extended to enable them to

undertake economic activities, including agriculture and small

businesses. In addition, they will also be provided with hire-purchase

facilities for boats and outboard engines under the Package of New

Strategies. To enable orang asli to purchase comfortable and ffordable

homes, they will also be given priority under the SPNB low and medium-

cost housing scheme as well as the provision of soft loans to acquire

these homes.

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154. An allocation of RM156.5 million is provided for the

implementation of programmes for orang asli. These include Rancangan

Pengumpulan Semula, Penyusunan Semula Kampung, and economic

development activities, such as entrepreneur and skills training. In

addition, for orang asli children, assistance such as school uniforms,

textbooks and bus fares have been provided.

Increasing Security Mr. Speaker Sir,

155. Recently, there has been a spate of hijacking, piracy and

gangsterism, including “tonto” activities as well as robberies and thefts.

To overcome these problems, the Government will increase and

strengthen security and enforcement. The police force will step up their

security surveillance throughout the country. The Government will review

several departments of the Royal Malaysian Police with the view to

increasing their capacity and effectiveness through the provision of

equipment and special training. Apart from this, the Government has also

established the Malaysian Maritime Enforcement Force (APMM) in its

efforts to increase surveillance in our waters, such as the Straits of

Malacca.

156. It is the responsibility of the Government to provide a safe

environment for the public and businesses. To ensure the safety of

enforcement officers in various agencies, they will be supplied with

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appropriate equipment while on duty. In appreciation of their services,

the benefits and remunerations provided to security personnel and their

families will also be extended to enforcement officers if they are injured

or die in the line of duty.

157. A sum of RM4.4 billion for operating expenditure is provided for

internal security while RM6.5 billion is allocated to the Ministry of

Defence for 2004. For development expenditure, allocations of RM750.5

million and RM2.1 billion have been provided, respectively to equip and

modernise the defence and security systems of the nation.

Third Strategy: Monetary Policy to Support Private Consumption and Investment

Mr. Speaker Sir,

158. Accommodative monetary policy will continue to be

implemented to promote domestic activities, in particular consumption

and investment. The Government will continue to maintain this policy,

especially given the low interest rate regime in the world. In addition,

there exists high liquidity in the system that can be mobilised to finance

domestic economic activities. As such, measures to manage this liquidity

will be put in place so as to ensure it will be utilised more efficiently to

stimulate domestic investment and consumption.

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Easier Access to Financing for SMIs

159. Small and medium industries (SMIs) need to be further

promoted to generate greater domestic investment activities. To further

strengthen their role, it is imperative for financial institutions to provide

greater access to finance and credit facilities to the SMIs. In addition to

financial facilities provided by the Government under the Package of

New Strategies, banking institutions must be pro-active in providing

loans, especially to small and medium businesses.

160. Given the good response from small businesses to the Micro-

Credit Scheme of BPM and BSN, the Government will provide an

additional RM1 billion to the Scheme.

161. The Government is also concerned over small and medium

businesses, which are facing difficulties in servicing their loans with

financial institutions. Under the Package of New Strategies, Bank Negara

Malaysia has established the Scheme to Restructure and Reschedule

Loans for all types of loans and credit facilities by borrowers in the

tourism sector. To date, loans amounting to RM3 billion have benefitted

from the Scheme.

162. In addition to this Scheme, the Government will also assist

SMIs to address their non-performing loans with financial institutions,

using a mechanism ala CDRC. Towards this end, BNM will establish the

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SMI Debt Restructuring Committee. It is the Government’s hope that this

mechanism will help to resolve the debts of SMIs.

Issuance of Merdeka Bonds 163. The Government is aware of the impact of the low interest

rates regime on groups whose income depend on savings in financial

institutions, that is pensioners aged 55 years and above who do not have

permanent jobs. To ensure that they receive higher returns, BNM will

issue serial bonds for this group with a maturity period of 2 years and a

return of 5% per year, higher than the interest rates on savings. The

Government proposes that the returns from these bonds be exempted

from income tax. In appreciation of the services and sacrifices of

uniformed personnel, this bond will also be extended to those who have

gone on mandatory retirement.

Expanding the Capital Market 164. The capital market continues to play an important role in

financing economic development, especially in terms of raising funds

from the market. Since 2001, more than RM99 billion have been sourced

from the capital market through the issuance of bonds and equities. In

addition, 13 asset-backed securities (ABS) valued at more than RM7

billion have been approved. This encouraging performance has been the

result of the implementation of initiatives under the Capital Market Master

62

Plan as well as the 10 new measures introduced by the Government in

March this year to strengthen the capital market.

165. Currently, there is no specific income tax provision for ABS.

As a measure to promote financing through the issuance of ABS, the

Government proposes that ABS be given equal tax treatment as other

conventional securities. At the same time, the Government proposes that

expenses incurred in the issuance of ABS be granted tax deduction for 5

years.

166. One of the 10 measures implemented to strengthen the

capital market is to encourage large companies to be listed on the KLSE.

Towards this end, FELDA which is not only the largest plantation

company in this region but also in the world, will also be listed on the

KLSE. FELDA shares are expected to become one of the blue chips on

the KLSE and FELDA has the potential to be promoted as an

international brand. With the listing, FELDA will be able to tap funds

from the capital market and therefore, will no longer depend on the

Government for its financial requirements. At the same time, the

Government will be able to reap returns from this listing, while the

FELDA Group of companies, settlers, cooperatives as well as state

governments, which have provided land to be developed as FELDA

plantations, will also benefit. FELDA settlers will have the opportunity to

hold equity in the listed company as members of the cooperative and as

settlers.

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167. The proposal is in line with the objective of the NEP to enable

Bumiputera to own at least 30% of the equity in the corporate sector. It

is hoped that Bumiputera will not divest their shares.

168. After 46 years of independence, we must take cognisance of

our weaknesses and work towards rectifying them. As a measure to

further expand investment opportunities through trust funds, especially

for Bumiputera, a Second Unit Trust Fund or Dana Harapan (HARAPAN)

will be established. This Fund will be managed by professional and

experienced managers to mobilise Bumiputera savings and capital.

169. The Government has significant high-value assets, which

have not been fully utilised. To optimise returns, the Government will

undertake to unlock these assets so as to enhance its financial position.

It will also provide investment opportunities for investors to utilize these

assets to generate returns and contribute to economic growth.

Expanding the Islamic Financial System

170. Since its introduction in Malaysia in 1983, Islamic banking

has brought a new facet to the nation’s financial system. Malaysia is one

of the nations that has a comprehensive Islamic financial system. We

began with the establishment of Bank Islam and now Malaysia has two

Islamic banks and 33 conventional banks offering Islamic banking

services. The growth of Islamic banking also serves as a catalyst to the

rapid expansion of the Islamic financial system, comprising banking,

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insurance and the capital market. Total assets of the Islamic banking

system increased almost four-fold to RM68 billion in 2002 from RM17.9

billion in 1997.

171. Islamic insurance or takaful industry has emerged as another

Islamic financial product, which has expanded rapidly since its

introduction in 1986, with total assets increasing from RM200 million to

RM4 billion this year. Islamic private debt securities (PDS) have also

received encouraging response with issuance exceeding RM34 billion

since 2001. The net asset value of Islamic funds has also increased

more than two-fold to RM4.3 billion.

172. At the international level, Malaysia was the first country to

issue global Islamic bonds, Sukuk Al-Ijarah. The US$600 million bond

was twice over-subscribed. Another significant achievement was the

establishment of the Islamic Financial Services Board in Kuala Lumpur to

ensure stability and strengthen the global Islamic financial industry. With

these achievements, Malaysia has now become a model in the

expansion of the Islamic financial system among Islamic countries.

173. As a measure to increase financing through the issuance of

Islamic securities, the Government proposes that a more comprehensive

tax treatment be provided similar to conventional securities. In addition,

deductions will be given on expenses incurred in the issuance of Islamic

securities based on the principle of Istisna’ for 5 years, where property

under construction can also be used to back such bonds.

65

174. To encourage companies and financial institutions which

practice Syariah principles to invest in Labuan, the Government

proposes that Labuan offshore companies be given tax rebate equivalent

to the total zakat paid, not exceeding RM20,000 or 3% of net profit.

Fourth Strategy: Enhancing the Nation’s Competitiveness

Mr. Speaker Sir,

175. Measures undertaken by the Government as well as

initiatives by the private sector to enhance efficiency and productivity

have contributed towards further strengthening the nation’s

competitiveness. Based on the 2003 World Competitiveness Yearbook,

among countries with 20 million and above population, Malaysia is

ranked fourth after the United States, Australia and Canada. This placing

is an improvement compared with the sixth position in 2002 and tenth in

2001. This improvement reflects the nation’s ability to compete in the

international market, attributable to the concerted efforts made by the

Government and the private sector since two decades ago.

176. The use of IT has become an integral part of business,

particularly high-speed internet access to enable the nation to become

more competitive. In addition more Malaysians, in particular the younger

generation are surfing the internet to acquire knowledge and obtain

66

current information. To ensure wider access to the internet at low cost,

Telekom Malaysia will reduce the internet access charges. In addition,

this reduction will promote e-commerce through wider and cheaper

access to broadband internet. Telekom Malaysia will provide 50%

discount for industrial and corporate package, beginning with 30% for

phase 1 and a further 20% for phase 2. For other users, a 30%

reduction will be given for consumer broadband internet charges.

177. To ensure wider and more efficient internet services, JARING

will be merged with TMNet. As Cyberjaya will become the hub for

selected services, accessibility and quality of broadband services will be

improved while the cost will be reduced to a more competitive level

compared with other countries.

178. In our efforts to further improve the nation’s competitiveness,

the private sector must continue to reduce the costs of doing business to

enable them to compete with lower cost manufacturers in other

countries. For this purpose, the Government has provided various

incentives, particularly in the Package of New Strategies. As a

continuous effort to achieve this, the Government proposes the following:

i. allowing full deduction on entertainment expenses

incurred in sales promotions and deduction of 50% on

other entertainment expenses;

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ii. abolishing the limit on the exemption period for import duty

and sales tax on spares and consumables for the

manufacturing and services sectors, which is due to expire

on 31 December 2003;

iii. extending deduction on incorporation expenses to

companies with authorised capital up to RM2.5 million,

currently enjoyed by those with authorised capital up to

RM250,000 only;

iv. reducing or abolishing import duties on selected goods

such as computer batteries, wooden and plastic goods,

from the current rates of between 5% and 30% to between

0% and 20%; and

v. reducing or abolishing export duties on several agricultural

produce and commodities, such as fish, fruits and certain

minerals, from the present rates of between 2.5% and

10% to between 0% and 5%.

179. The mass media industry has become an important sector to

create a knowledge society. It is proposed that local publishing and

printing companies be given exemption of anti-dumping duty on imported

newsprint on the quantity that cannot be supplied by local producer. This

exemption will render the cost in the publishing and printing industry to

be more competitive.

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Fifth Strategy: Strengthening Social Agenda And Caring Society

Mr. Speaker Sir,

180. Recently, almost every day, we read and hear about

incidences of social ills in the mass media, including the militant groups,

cold-blooded murders, kidnappings, secret societies, merciless acts of

loan sharks, incest, drugs and HIV/AIDS. Of greater concern are moral

decadence and incidence of crimes among youths, particularly school

children. We also hear of murders committed by under-aged children,

runaways among teenagers, extortion, truancy and gangsterism among

students.

181. Previously, we see such incidents only happening abroad,

through TV and newspapers. But they are now happening before our

own eyes, in our country. These are social ills resulting from the

unrestrained influence of television and the internet. Such influence has

adversely affected some segments of the Malaysian society as well as

destroyed our cultural values. Modern technology has been misused,

particularly by illegal VCD producers, who are only interested in reaping

profits without any regard for the negative influence on society.

182. The Government is determined to step up efforts to curb

social ills, particularly among the youths. Towards this end, the National

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Social Policy has been launched, with the objective to promote social

development based on noble values and self-enrichment to achieve unity

and stability, national resilience as well as the well-being of Malaysian

society. To enable a more integrated, strategic and comprehensive

approach to address social problems, the Government will establish 50

community service centres in areas with high incidence of crimes and

social problems. The Government urges NGOs and members of local

communities to work together to ensure the successful implementation of

the Policy.

Harmonious Families Basis for High Moral Values

183. We must intensify our efforts to combat social ills, particularly

among the youths, the potential leaders of the future. Efforts in building a

Malaysian society with high moral values are not the sole responsibility

of the Government. The family, particularly parents and the society must

share this responsibility in moulding youths with good behaviour, practise

healthy lifestyle, are disciplined and knowledgeable as well as the

assimilation of religious values. These values provide a strong

foundation to curb social problems and build a society that is truly

successful in all aspects of life.

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Recognising the Role of Women

Mr. Speaker Sir,

184. The role of women in moulding happy families and their

contribution in national economic and social development has always

been recognised. The success of women in balancing this dual role

cannot be denied and is indeed admirable. The responsibility of women

in nurturing families based on My Home My Heaven, begins from the

birth of a child till adulthood. Mothers play the key role in moulding and

inculcating good values in children so as to become knowledgeable and

devoted to family and willing to serve for the betterment of race, religion

and country. Youths imbued with high morals and strong resilience will

stand the challenges of our time and prevent them from being dragged

into the miseries of social ills. It is their generation that will continue with

our aspirations and strive to uphold the nation’s dignity. Parents must

give greater attention to their role in nurturing a responsible generation.

185. Unfortunately, there are some who undermine the status and

dignity of women. There are some husbands who divorce their wives

through SMS. Marriage is a noble event involving all family members,

especially parents of the bride and groom, kadi and witnesses as well as

close friends. Although Islam allows husbands to divorce their wives by

mere utterance of the words, divorce should not be taken lightly. It

should be carefully thought through as children often become victims.

Using SMS does not reflect respect for the sanctity of marriage and

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family institutions, including children. In addition, SMS is not secure as

anybody can use it to send divorce messages without the knowledge of

the husband. The resultant social problems will not reflect the true

character of Islam.

186. There are also some who restrict the contribution of women

in development by only allowing them to become teachers and welfare

officers and preventing them from becoming judges, Government

administrators or joining the security forces. For the Barisan Nasional

Government, women stand equal with men in the mainstream of

development. Female workforce has increased to more than 45%. In

the history of Islam, women had fought alongside Prophet Muhammad in

war, while in business, Saidatina Khadijah was involved in cross-border

trade. Remember, heaven lies beneath the mother’s feet. Behind every

successful man is a wife. The hand that rocks the cradle shakes the

world.

187. In the light of fewer male students in institutions of higher

learning, restricting the role of females will only result in reducing the

human resources of Muslims by more than half. As such, Muslims in

Malaysia will have to depend on others for everything. Do not be

disappointed when this happens. Do not blame the women if men are

unable to control their desires. Islam does not place the responsibility of

restraining desires solely on women.

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188. Programmes for the development of women and family

institution will be further enhanced and a sum of RM105.4 million has

been allocated. This includes training, guidance and counseling to instil

greater confidence and encouragement to women, especially single

mothers, the elderly and the disabled.

189. To enable single mothers in rural areas to increase their

income from their businesses, a sum of RM100 million from the Village

Micro-Credit Scheme will be set aside to provide loans to those with own

businesses. Single mothers in the low-income group will also be given

priority to purchase low and medium-cost houses from SPNB with a 20%

price discount.

190. The Government has provided several tax incentives to

employers to establish childcare centres at the workplace. However, the

response from private employers has not been encouraging. In this

regard, the Government may consider the establishment of such facility

as a condition in the development order of Local Authorities.

191. The Government is aware of the rising costs of bringing up

and educating children. To assist parents in reducing the burden of

expenditure on children, the Government proposes an increase in tax

relief from RM800 to RM1,000 per child.

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Youths as Future Generation Achieving Excellence in Sports

Mr. Speaker Sir,

192. The youths, who represent the future generation, that will

continue to strive to develop the nation, must be imbued with strong self-

resilience. Towards this end, the Government will implement the

National Service Programme involving some 100,000 youths. This

programme will include basic military training, civics education, character

building and social services, aimed at nurturing the spirit of cooperation,

national unity and integration as well as healthy lifestyle. An allocation of

RM300 million is provided for this programme.

193. The Government is proud of the success of our national

athletes who have brought fame and glory to the nation at the

international level. The most recent accomplishment is our national

marathon swimmer who has become the first from South-East Asia to

successfully swim across the English Channel. Physical resilience and

mental strength as well as endurance have enabled him to swim against

waves as high as 3 meters and to withstand the icy cold waters. Our

badminton players have also succeeded to become the All England

Champion as well as the first runner up in the World Badminton

Championship. Let these spur us to greater heights in sports. This

achievement is not merely another success of our national heroes, but

shows that with discipline, dedication and strong determination,

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Malaysians too can attain success in all fields. These achievements

should inspire and strengthen our determination to achieve excellence in

sports.

194. The Government values the contribution of all, including state

governments, corporate sector and NGOs in rewarding our sports

champions. I hope our athletes will not be distracted by these rewards,

but continue to improve their performance. In appreciation of our

athletes who have brought fame and glory to the nation and enabled

Malaysians to walk tall, the Government will provide scholarships for

those athletes who wish to further their studies locally or abroad to

become coaches or managers in the sports of their choice.

195. Our young men are the nation’s hope and our young women

the nation’s pillar. Healthy bodies make for active minds. A sum of

RM657.9 million is provided to the Ministry of Youth and Sports for 2004.

We are actively training our athletes for their participation in the 28th

Olympic Games in Athens, Greece. In addition, Malaysia will once again

host the Extreme Sports for the third year.

196. To provide greater recreational facilities to the public,

especially the youths, the Government will make the provision of such

facilities a prerequisite in new housing development projects. In addition,

all local authorities must provide facilities, such as parks and

playgrounds as well as recreational areas for activities, including jogging.

75

For this purpose, the Government will provide an initial sum of RM50

million.

Providing Support to the Disabled

Mr. Speaker Sir,

197. The Government is concerned with the well-being of the

disabled and will ensure that they continue to benefit as well as

participate in the mainstream of development. Several financial

assistance have already been provided for them, including financial aid

of between RM80 to RM350 a month. As of mid-2003, a total of 122,543

disabled persons has registered and received financial aid, amounting to

RM88.5 million.

198. To encourage the disabled to continue working to support

themselves and their families, a Disabled Worker Allowance of RM200

per month has been provided if their monthly income ceiling does not

exceed RM500. The assistance is provided to meet the cost of transport

to the workplace as well as other expenses. To enable more disabled

workers to enjoy this financial aid, the Government proposes that their

income ceiling be raised from RM500 to RM750 a month.

199. As a measure to ensure that the disabled also have access

to job opportunities, the Government has allocated 1% of public service

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posts for the disabled. In addition, a special unit will be established at

the Ministry of Human Resources to assist the disabled in getting jobs.

200. The Government sympathises with the heavy responsibility of

parents with disabled children and the high cost of sending them to

special schools. To help these parents and their children, the

Government proposes that a monthly allowance of RM25 per person be

given to disabled students in primary and secondary schools to

encourage them to receive education. For the disabled in institutions of

higher learning, the Government proposes that the present monthly

allowance of RM300 per person for those with impaired hearing, also be

extended to them.

201. For civil service employees with disabled children, the

Government will allow them to work on flexi-hours to facilitate them in

caring for their children. The Government also proposes that the private

sector provides similar facility.

202. In the 2003 Budget, the Government had announced a fund

of RM100 million to finance treatment of those suffering from chronic

diseases. The Government now proposes that a special fund of RM10

million be established for the disabled suffering from chronic diseases.

203. Job opportunities for the visually impaired, such as typists,

stenographers and telephone operators are declining. As such, they

need to be provided with skills in new areas, such as IT, physiotherapy

77

and others. In this regard, the Association for the Blind is encouraged to

establish a network of Franchise Shops to provide opportunities for them

to become entrepreneurs as well as create more job opportunities. They

can also obtain financing from the Government’s Micro-Credit Scheme

and will be given suitable locations to establish a network of Franchise

Shops. In addition, the Government will also bear the full expenses for

the purchase of white canes and Braille machines for the visually

impaired.

204. The Government will also ensure that the disabled can own

comfortable and affordable homes. For this purpose, the disabled in the

low-income group will be given priority to purchase low and medium-cost

houses from SPNB, with a price discount of 20%.

205. To help reduce the cost of transport for the disabled, Syarikat

Prasarana Negara Berhad will give a 50% discount on travel fares.

Private transport companies are encouraged to extend the same facility.

In addition, the Government proposes that road tax be exempted on

locally manufactured cars, vans and motorcycles owned by the disabled.

206. To ensure the disabled also benefit from the use of ICT, a

Pioneer ICT Resource Centre will be established in Sungai Buloh to train

the visually and hearing impaired in ICT skills. The Government will also

provide ICT enabler to facilitate them to use ICT as a communications

tool, particularly at zebra crossings and during emergencies, especially

on the highways. In addition, all Government buildings will be provided

78

with appropriate facilities to help the disabled in their dealings with

Government departments, including facilities in lifts. The Government

hopes the private sector will also provide such facilities for them.

Meeting the Need for Low and Medium-Cost Housing

Mr. Speaker Sir,

207. The Government is sensitive to the need for housing,

particularly for the low and medium-income group. Based on the

national population profile, especially those in the age group of 20 to 24

years, the demand for low and medium-cost houses is expected to

increase by 500,000 units in the next 5 years. To ensure this group will

have the opportunity to own houses, the Government will take over the

construction of low and medium-cost houses, particularly through

Syarikat Perumahan Negara Berhad (SPNB).

208. To reduce the burden of private housing developers, they will

be given the choice of either implementing the construction of 30% of

low-cost houses or allowing SPNB to undertake its construction.

However, they are required to pay a contribution in return. EPF

contributors who purchase low-cost houses built by SPNB will be

provided with end financing from MBSB. This will ease their financial

burden as well as reduce the administrative red tape in obtaining

financing from commercial banks. As the provision of low-cost housing

is a social responsibility of the Government, state governments are

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requested to exempt land premiums for the construction of low-cost

houses. All utility companies providing facilities, such as electricity,

water and telephone will also be requested to charge only basic costs.

209. A pilot project based on a new concept will be implemented

as a showcase on 1,000 acres of land owned by the Rubber Research

Institute of Malaysia (RRIM) in the Klang Valley for the construction of

10,000 units of affordable homes. The project will also be provided with

public transport facilities, religious centres, commercial facilities,

shopping centres, retail shops, recreation facilities, such as parks and

playgrounds and community halls as well as other facilities.

210. For 2004, the Government will provide a sum of RM558.8

million for several low-cost public housing projects. Of this, RM484

million is for the construction of 62,672 units of low-cost houses under

Programme Perumahan Rakyat and will be rented out to squatters in the

Federal Territory of Kuala Lumpur and major towns. The balance of

RM74.5 million is allocated as loans to state governments to continue the

construction of 28,541 low-cost houses.

211. For the armed forces, a sum of RM418.1 million is provided

to continue the construction of 2,500 units of houses, while RM251

million is provided to complete 44 housing projects for the police force. A

sum of RM38 million is provided for the construction of common use

quarters in the KLIA area and Kuala Lumpur.

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212. To solve the problem of abandoned housing projects, the

Government will undertake measures to expedite the rehabilitation of

such projects. Currently, there are 204 abandoned projects throughout

the country involving nearly 66,000 units valued at RM5.6 billion. The

rehabilitation of more than half of these projects involving 36,000 units

valued at RM3.4 billion is being undertaken by SPNB. To overcome the

delay resulting from problems between creditors, developers and banks,

Danaharta will manage the non-performing loans of the relevant financial

institutions and task SPNB to complete the projects. In addition, SPNB

will also take over and manage housing projects under Tabung Pusingan

Perumahan Kos Rendah (TPPKR), which is currently under TPPT Sdn

Bhd.

213. The Real Estate Investment Trust and the Property Trust

Fund will be established to enable small investors to invest in the real

property sector. The funds will be managed by professional managers to

generate more attractive returns. To encourage the development of

these funds, the Government proposes:

i. exempting the real property gains tax on gains from

disposal of property by individual or company to these

funds; and

ii. exempting stamp duty on instruments of transfer of real

property from individual or company to these funds.

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Clean Environment Makes Healthy Citizens

Mr. Speaker Sir,

214. A clean environment is paramount in preventing infectious

diseases, such as SARS which had recently affected the country. The

Government is serious in preventing contagious diseases that can be

fatal. As a measure to ensure cleanliness in our environment, an

appropriate waste disposal system, particularly in towns is essential. For

this purpose, the Government proposes to build a modern and safe

waste incinerator plant. The plant, which is expected to cost RM1.5

billion, is better than most waste incinerator plants even in developed

countries. In these countries, waste incinerator plants have been built in

industrial or housing areas without any opposition from residents.

215. To ensure the environment remains clean, an allocation of

RM1.9 billion is provided under several ministries and agencies. Of the

amount, a sum of RM680 million is provided for flood mitigation

programme, particularly in overcoming flash floods, which often occur in

Kuala Lumpur. In addition, a sum of RM462 million is provided for the

management of solid waste and RM422 million for sewerage projects.

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Non-governmental Organisations (NGOs)

Mr. Speaker Sir,

216. The Government acknowledges the contribution of NGOs in

carrying out welfare activities as well as appreciates their spirit of

volunteerism, even risking their own safety in undertaking their missions.

We have witnessed the courage and bravery of MERCY during their

peace missions to provide assistance to war victims in Afghanistan and

Iraq. In addition, several NGOs have supported and worked together

with the Government in dealing with social problems, such as drug

addiction, HIV/AIDS as well as caring for the less fortunate, such as the

elderly and destitute, disabled and those suffering from chronic diseases.

217. NGOs must strengthen understanding and cooperation

through smart partnership with the Government towards building a

responsible and caring Malaysian society. Towards this end, they must

set standards in evaluating their performance, especially with respect to

effective leadership as well as their activities and financial management.

This will enable them to become more ethical, efficient and accountable

in discharging their duties as NGOs.

218. The Government will continue to provide support and

contribution to NGOs to undertake their activities. A sum of RM96.4

million has been provided, including RM6 million for AIDS prevention,

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RM20 million for women and family development, RM20.8 million for

health programmes and RM26.6 million for the disabled.

Fostering Arts and Culture

219. Arts and culture depict the identity of a society. In this

regard, local works of art and culture must be nurtured to enable them to

thrive and flourish and to further cultivate the interests of art enthusiasts.

The lack of quality works of art and culture has resulted in promoters

bringing in performances from abroad. The Government has provided

several facilities, such as Istana Budaya, Philharmonic Hall in KLCC,

Kuala Lumpur City Hall Auditorium and several experimental theatres as

well as the National Arts Academy training centre. To achieve excellence

in arts as well as promote the teaching of arts, the Government has

allocated a sum of RM80.3 million, especially for the training of arts and

culture.

220. The Government has provided several tax incentives to

encourage arts and cultural activities, including exemptions on

entertainment duty on stage performances, income of music composers

as well as contributions by private sector for the sponsorship of arts and

culture. To encourage production of arts and cultural shows involving

local artistes, the Government proposes that deduction on contributions

by private sector be increased from RM200,000 to RM300,000. This

increase is specifically to sponsor performances by local artistes.

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221. To encourage the local production of quality films, producers

can access loans and venture capital from MTDC. With this, the

Government hopes that there will be better quality films produced locally

to substitute imported films to be screened in local cinemas and TV

channels.

Promoting Excellence in the Civil Service

Mr. Speaker Sir,

222. The public sector delivery system has often been raised in

budget dialogues. In this regard, the Government continues to improve

its delivery system to ensure the efficient and effective implementation of

national development policies and strategies. The process of approval as

well as the issuance of permits, licences and CFOs will be streamlined

and expedited. The Government will promote the use of ICT through the

implementation of e-Government. In the Ministry of Finance, services

such as e-perolehan, e-SPKB and e-stamping have been implemented.

In addition, the issuance of patents and copyrights will be expedited by

increasing the number of highly skilled personnel.

223. The Government appreciates the support and commitment of

the civil service for their efforts and services in ensuring efficient,

effective and successful implementation of development policies,

strategies and programmes. For the security forces, including the Police

and Armed Forces, the Government values their contribution and

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sacrifices in maintaining national security and public order. In

appreciation of their services in defending the country, the Government

will extend free medical treatment facilities to ex-Sarawak Ranger

personnel and wives as well as the wives of ex-personnel of Force 136

and the British Army. The Government will also extend to them the

benefits of hospital ward charges currently provided to families of ex-

reserve personnel of Malaysian Armed Forces.

224. The Government is also concerned with civil servants without

immediate beneficiaries, to benefit from pension upon death prior to

retirement. To ensure that the beneficiaries also enjoy similar benefits of

pensioners with immediate beneficiaries, the Government will extend the

derivative pension benefits, apart from gratuity to either one of their

parents.

225. The Government is confident civil servants will strive to

provide excellent services and are fully committed in their work and

responsibilities. In appreciation of the increase in their productivity and

services and after taking into consideration the improved economic

conditions, the Government has agreed to pay an additional half-month

bonus, making the bonus payment for the whole year to one-month

salary.

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Appreciating the True Teachings of Islam

Mr. Speaker Sir,

226. Presently, Islam has been associated with backwardness and

poverty. Since the 11 September incident, Islam has also been

associated with terrorism. In reality, Islam has high regards and respects

for its followers who are diligent, possess skills and capable of achieving

progress and prosperity in line with the principles of Islam. Indeed, Islam

emphasises on civilization or Islam hadari, which propagates excellence

as a way of life. Islam also promotes peace, stability and prosperity and

is against terrorism, aggression and brutality. The international

community should get to the root causes of terrorism and not accuse

Islam and labelling them as terrorists.

227. Islam as ad-din or a way of life encompasses all aspects of

life. If we stay with the basic teachings of Islam as in Al-Quran and

Hadith sahih, and not influenced by certain ulamas with their own

interpretations and teachings, which are against the true teachings of

Islam, there is no reason for the Islamic community to be weak,

demeaned and oppressed by others. Allah commands, as in surah Ar-

Ra’d verse 1: “Verily never, will God change the condition of a people

until they change it themselves.” To uplift oneself requires diligence,

knowledge and special skills. As such, we in Malaysia do not only pray

for help from the Almighty but also seek knowledge and skills as well as

implement our development plans and defence to ensure security for the

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nation. In this regard, many leaders and ulamas including Sheikh Al

Azhar have openly proclaimed Malaysia as an Islamic country that

should be emulated by other Islamic nations.

228. The perception that Islamic nations must be poor, backward,

with a government that is always asking for aid and weak, as in states

governed by those who are not competent in administration, indeed

humiliates Islam. These states cannot become the model of Islamic

nations capable of bringing back the past glory of Islamic civilization.

229. The Government will continue to emphasise measures to

instil the true teachings of Islam to ensure Muslims are imbued with

noble values and not be misguided by wrong teachings by those who

have worldly political interests. Towards this end, Jabatan Kemajuan

Islam Malaysia (JAKIM) will implement additional programmes to

enhance understanding and appreciation of the teachings of Islam. A

sum of RM228 million will be allocated for these programmes. The

Government also provides RM105 million to undertake the construction

of training complexes, religious schools, mosques as well as the

development of an Islamic information system.

230. As an Islamic nation, the Government is concerned with the

rising costs of performing the Haj. As such, the Government is

committed to ensure that such cost is contained. Otherwise, we are

concerned that in the future, many Malaysians in rural and urban areas

will be unable to perform the Haj.

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231. A major portion of the costs in performing the Haj is for air

travel and accommodation in Mekah and Madinah. As such, Syarikat

Penerbangan Malaysia Bhd (PMB) will acquire two aircrafts with the view

to reducing the high lease cost to Tabung Haji. In addition, Tabung Haji

will increase the construction and acquisition of accommodation in

Mekah and Madinah to contain the increase in the cost of

accommodation. The Government is pleased to announce that the cost

of performing the Haj through muasasah in 2004 will be reduced by 5%.

ECONOMIC PROSPECTS IN 2004

Mr. Speaker Sir,

232. The external environment is expected to further improve in

2004, particularly for several developed countries. This is attributed to

the expansionary fiscal policy, low interest rate regime, wealth effect

from the bouyant stock markets as well as lower petroleum prices. In

addition, consumer confidence remains strong while private investments

have also recovered.

233. The economic prospects for the region are also expected to

strengthen following the end of the spread of SARS as well as the

increase in private consumption and regional trade. China is expected to

continue to record high growth, with Korea, Taiwan and Hong Kong also

registering stronger growth in GDP.

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234. The Malaysian economic performance in 2004 is projected to

continue to expand strongly supported by robust domestic economic

activities as well as the recovery in external economies. In line with this

development and the positive impact of the Package of New Strategies,

GDP is forecast to further expand between 5.5%-6% in 2004. The

private sector is expected to spearhead economic growth with private

investment expanding strongly by 9.9%. Private consumption has also

responded positively to the stimulus measures and is projected to

expand at a higher rate of 7.7%.

235. The manufacturing sector will continue to be the main

contributor of growth and is expected to increase by 7.2%, while the

services sector by 5.5%. With the policy emphasis and strategies on the

agriculture sector as well as high commodity prices, the sector is

expected to expand steadily by 3%. The mining sector is also expected

to grow by 3.5%, following the increase in the production of LNG and

natural gas.

236. In line with fiscal consolidation policy, the Federal

Government financial position is expected to improve with the budget

deficit declining from 5.4% to 3.3% of the GDP. If global recovery is

stronger in the near term, the objective of attaining a balanced budget is

expected to be achieved in 2006. Higher world economic growth will

contribute towards strengthening the public sector account, which is

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expected to register a surplus of 0.4% of the GDP in 2004 compared with

a deficit of 1.5% in 2003.

237. Consistent with GDP growth, the per capita income is

expected to increase to RM14,954 while the purchasing power parity of

Malaysians will rise to almost US$10,000. Prices are expected to remain

low, with the Consumer Price Index forecast at 1.3%.

CONCLUSION

Mr. Speaker Sir,

238. Since Independence, the nation has gained considerable

success and achieved significant progress. In a span of almost half a

century, we have been able to sustain prosperity in an environment of

peace and harmony as well as unity among Malaysians. We have also

succeeded in maintaining political stability, on account of the strong

solidarity of the Barisan Nasional Government, which upholds the

principles of equitable collaboration, sincerity in our efforts as well as

willingness to sacrifice for the nation. This has been our tradition. This is

the uniqueness of our political collaboration that has strengthened and

fostered unity among all races under one nation.

239. However, we cannot be complacent of continued success.

The external environment continues to remain difficult, with increasing

threats and intimidations as well as aggression and oppression. The

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peace that we hope for is still far away, while the acts of terrorism that

we abhor, still have not subsided. As a small nation in the global

community, we are not spared the impact of the difficult external

environment.

240. We must be brave to face all these challenges. We must be

prepared to undertake strategic shifts in our drive to safeguard and

sustain the progress and prosperity that we have painstakingly worked

for. I had urged all Malaysians to make this paradigm shift when I tabled

the Budget 2003. We must undertake this shift with greater vigour,

determination and perseverance. We cannot be complacent, neither can

we waver in our efforts to effect changes. We must be courageous and

steadfast to face all obstacles and constraints. We must be willing to

sacrifice, set aside our self-interests and avoid discord and conflicts

among us. We must be more tolerant, reinforce our cooperation and

foster unity towards building a prosperous and harmonious Malaysian

society.

241. I pray to the Almighty that our beloved nation will continue to

be bestowed with prosperity and dignity. God willing, I am confident that

this nation will continue to progress, that Malaysians will be blessed with

continued prosperity and well-being as well as respected by the world

community.

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Because of you Malaysia

We uphold the nation, unite the people

We set a thousand steps forward

Together we strive in darkness, riding the waves

Seeking for the light, reaching for the dream

Defying a million obstacles

Though we may fall

We shall persevere to achieve our vision

Peaceful is my country

Blessed with success, bestowed with prosperity

United we stand, resolute in determination

Glow the spirit of patriotism

The world has acknowledged

Our dignity has been upheld

No more aggression

No more humiliation

Our independence enshrined

Peaceful is my country.… Malaysia

Mr. Speaker Sir, I beg to move.